The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday revised its GDP growth forecast for FY2025–26 upwards to 6.8%, compared with 6.5% projected in August. Quarterly growth for Q1 of next year is projected at 6.4%.
RBI Governor Sanjay Malhotra projected India’s quarterly GDP growth for FY26 at 7.8% in Q1, 7% in Q2, 6.4% in Q3, and 6.2% in Q4.
He noted that “rural demand is strong, supported by a good monsoon and robust agricultural activity, while urban demand is gradually reviving. Revenue expenditure by Union and State governments has also recorded robust growth so far this fiscal year.”
Looking ahead, Malhotra added, “An above-normal monsoon, good progress in kharif sowing, and adequate reservoir levels are expected to further boost agriculture and rural demand. Buoyancy in the services sector, coupled with steady employment conditions, supports domestic consumption. The rationalisation of GST rates is expected to give an additional lift.”
Also Read: RBI MPC Meeting 2025-26 Key Takeaways: Check all announcements made by Malhotra & co
“However, ongoing tariff and trade policy uncertainties, along with geopolitical tensions and volatility in international financial markets, remain downside risks,” he cautioned.
The central bank left the repo rate unchanged at 5.5%, after cutting rates by a total of 100 basis points since February.
Core inflation stood at 4.2%, indicating that underlying price pressures remain largely contained. The RBI has revised its CPI forecast for FY26 down to 2.6% from 3.1%, with quarterly projections at 1.8% in Q2 (down from 2.1%), 1.8% in Q3 (down from 3.1%), and 4% in Q4. Inflation is expected to rise gradually to 4.5% in Q1 FY27 as the economy adjusts to evolving domestic and global conditions.
As per Bloomberg citing a senior official, tax cuts are expected to cushion the impact of tariffs and support growth at the higher end of the government’s forecast range of 6.3%–6.8% for FY26.
According to the Economic Survey presented in Parliament by Finance Minister Nirmala Sitharaman on January 26, 2025, India’s economy is projected to expand within the 6.3%–6.8% band in FY26.
Earlier, EY revised its forecast for India’s real GDP growth in FY26 to 6.7%, up from its earlier estimate of 6.5%. The firm, in its September edition of Economy Watch, said the upgrade factors in the expected boost from GST 2.0 reforms, stronger domestic demand, and the prospect of monetary easing, even as global headwinds weigh on exports.
Meanwhile, the Asian Development Bank (ADB) has cut India’s growth forecast for FY26 to 6.5%, down from its April estimate of 6.7%, citing the impact of the 50% U.S. tariffs on Indian exports. It also lowered its projection for FY27 to 6.5% from 6.8% earlier.
Also Read: RBI Inflation FY2025-26: MPC lowers inflation aim to 2.6%, thanks to GST rationalisation
“The revisions reflect downgrades for India, hit by steep tariff hikes, and Southeast Asia, driven by a worse and more uncertain global environment,” ADB said in a report. “India faces the steepest tariff hikes among developing Asian economies, prompting a downgrade in its growth outlook.”
The MPC flagged that the global environment remains uncertain, with trade disputes, volatile commodity prices, and geopolitical tensions still weighing on India’s growth outlook. At the same time, resilient rural consumption, robust services activity, steady public capital expenditure, and a normal monsoon are expected to keep domestic demand strong.
RBI Governor Sanjay Malhotra projected India’s quarterly GDP growth for FY26 at 7.8% in Q1, 7% in Q2, 6.4% in Q3, and 6.2% in Q4.
He noted that “rural demand is strong, supported by a good monsoon and robust agricultural activity, while urban demand is gradually reviving. Revenue expenditure by Union and State governments has also recorded robust growth so far this fiscal year.”
Looking ahead, Malhotra added, “An above-normal monsoon, good progress in kharif sowing, and adequate reservoir levels are expected to further boost agriculture and rural demand. Buoyancy in the services sector, coupled with steady employment conditions, supports domestic consumption. The rationalisation of GST rates is expected to give an additional lift.”
Also Read: RBI MPC Meeting 2025-26 Key Takeaways: Check all announcements made by Malhotra & co
“However, ongoing tariff and trade policy uncertainties, along with geopolitical tensions and volatility in international financial markets, remain downside risks,” he cautioned.
The central bank left the repo rate unchanged at 5.5%, after cutting rates by a total of 100 basis points since February.
Core inflation stood at 4.2%, indicating that underlying price pressures remain largely contained. The RBI has revised its CPI forecast for FY26 down to 2.6% from 3.1%, with quarterly projections at 1.8% in Q2 (down from 2.1%), 1.8% in Q3 (down from 3.1%), and 4% in Q4. Inflation is expected to rise gradually to 4.5% in Q1 FY27 as the economy adjusts to evolving domestic and global conditions.
As per Bloomberg citing a senior official, tax cuts are expected to cushion the impact of tariffs and support growth at the higher end of the government’s forecast range of 6.3%–6.8% for FY26.
According to the Economic Survey presented in Parliament by Finance Minister Nirmala Sitharaman on January 26, 2025, India’s economy is projected to expand within the 6.3%–6.8% band in FY26.
Earlier, EY revised its forecast for India’s real GDP growth in FY26 to 6.7%, up from its earlier estimate of 6.5%. The firm, in its September edition of Economy Watch, said the upgrade factors in the expected boost from GST 2.0 reforms, stronger domestic demand, and the prospect of monetary easing, even as global headwinds weigh on exports.
Meanwhile, the Asian Development Bank (ADB) has cut India’s growth forecast for FY26 to 6.5%, down from its April estimate of 6.7%, citing the impact of the 50% U.S. tariffs on Indian exports. It also lowered its projection for FY27 to 6.5% from 6.8% earlier.
Also Read: RBI Inflation FY2025-26: MPC lowers inflation aim to 2.6%, thanks to GST rationalisation
“The revisions reflect downgrades for India, hit by steep tariff hikes, and Southeast Asia, driven by a worse and more uncertain global environment,” ADB said in a report. “India faces the steepest tariff hikes among developing Asian economies, prompting a downgrade in its growth outlook.”
The MPC flagged that the global environment remains uncertain, with trade disputes, volatile commodity prices, and geopolitical tensions still weighing on India’s growth outlook. At the same time, resilient rural consumption, robust services activity, steady public capital expenditure, and a normal monsoon are expected to keep domestic demand strong.
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